February 28, 2013

A Simple Look At New, Discontinued, and Carryover Merchandise

It's a simple table, really.

And yet, it tells us an amazing amount of information.

This is a business that is being killed by the merchandising team.

I like to look at what I call the "carryover ratio" ... comparing how carryover product performed last year, vs. two years ago.
  • 2011 Carryover Ratio = 74,382,048 / 87,443,297 = 85%.
  • 2012 Carryover Ratio = 69,483,920 / 86,854,900 = 80%.
The stuff the merchants decided to keep performed at 80% of prior year levels in 2012.  A year ago, the carryover ratio was 85%.  This tells us that what the merchandising team kept is dying at a faster rate than in the past.

Look at the number of newly introduced products, year-over-year.
  • 2011 = 845 items.
  • 2012 = 749 items.
Your merchandising team doesn't have enough new product in the pipeline.  Look at demand per item for new merchandise.
  • 2011 = 17,910,854 / 845 = $21,196.
  • 2012 = 14,559,047 / 749 = $19,438.
Not only did your merchandising team throttle new product development, the new items they introduced performed close to 10% worse than last year.

I also like to look at the ratio of new merchandise demand to discontinued merchandise demand.
  • 2011 Ratio = 17,910,854 / 4,772,277 = 3.75.
  • 2012 Ratio = 14,559,047 / 5,438,002 = 2.68.
New merchandise is not generating enough of a multiplier against discontinued merchandise.

These are easy metrics to acquire.  Go acquire them, analyze 'em, see if merchandise is your problem (hint, it usually is).

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